Canada’s Crypto Crackdown, Global AML Shifts, and New Fronts in Financial Crime

In this episode of This Week in AML, John and Elliot cover a wide range of financial crime and compliance developments from around the globe. John opens by honoring the Foley Foundation's annual Freedom Awards dinner, recognizing the organization's vital work advocating for American hostages and journalist safety.

The conversation then turns to Canada, with updates on a newly introduced bill to establish a Financial Crime Agency, a proposed ban on crypto ATMs, and recent FinTrac monetary penalties across the real estate, banking, and precious metals sectors.

Internationally, they cover the FCA's preparations for the UK's new crypto asset regime taking full effect in 2027, Denmark's FSA referral of Nordea Bank to police over customer due diligence failures, and Europol's launch of a new EU anti-scam intelligence sharing platform.

Back in the U.S., John highlights new research from the Anti-Corruption Data Collective on suspicious win rates in prediction market defense and military sectors, the retirement and recognition of Guy Fico, the passing of RICO statute architect Bob Blakey, and the Manhattan DA's return of over 650 antiquities to India.

The episode closes with updates on the DOJ's decision to drop its investigation into Fed Chairman Jerome Powell, concerns over judicial nominees, and a preview of the AML Rightsource's upcoming May 28th webinar on financial access challenges domestically and globally.

Canada's Crypto Crackdown, Global AML Shifts, and New Fronts in Financial Crime - Transcript

Elliot Berman: Hey John, how are you today?

John Byrne: I'm good, Elliot. Unfortunately, we're still at war - and as we're recording this, who knows? We'll have to keep our tabs on that. But I did want to mention that last night, my wife Sue and I were at the Foley Foundation's annual awards dinner, the Freedom Awards. The Foley Foundation - I've talked about this before, and if you go back in the archives, I've actually interviewed Tom Durkin, who's with the Center for Peacemaking and also sits on the Foley Foundation board. He was one of Jim's roommates. Jim Foley was murdered by terrorists in Syria back in 2014, and his mother Diane, his father John, and others put this foundation together. I just wanted to remind people that the mission of the foundation is to advocate for American hostages and wrongful detainees held abroad and to promote journalist safety - which is so important. A number of awards were handed out last night, and the Foley Foundation has some very interesting curriculum on journalist safety. If you get the chance, go to their website. I'm glad we were able to participate in that dinner last night.

Elliot Berman: It's an important organization. We talk about a number of other key journalistic organizations - OCCRP and ICIJ - and report on their reporting on a regular basis. The free flow of information from journalists around the globe is critical to anti-corruption efforts and to the rule of law. And John, I applaud your activities in that area and also those of the three organizations you and I just talked about. So what would you like to cover next?

John Byrne: We were fortunate enough to go, but again, the foundation does tremendous work. Why don't we start with our neighbors to the north - Canada - and mention some of the things going on regarding AML and financial crime there.

Elliot Berman: Before I get to AML and financial crime, Karen and I are planning to visit our good neighbors to the north early this summer, so we too agree that they are still our good friends.

A couple of things. A bill has been introduced in Canada to establish a Financial Crime Agency - another FCA, so we'll have more of them - but the idea is to create an enforcement body to tackle financial crime. There's been some criticism that the way things are organized now, with FinTrac and others, there isn't as much coordination, so this would put everything under one umbrella. It did pass the first reading in Parliament this past week and is expected to move forward reasonably quickly because the Liberal Party, which is governing today, has a majority and is supporting it. It will shift the current enforcement model. Currently FinTrac, the FIU, doesn't carry out arrests or prosecutions - it passes intelligence to the RCMP - and under the new framework, the FCA would take on both roles. And in addition to that - I found this really interesting - Canada has introduced a proposal to ban crypto ATMs. The government publishes every year something called the Spring Economic Update, and in that document they announced plans to ban crypto ATMs as part of a wider effort to tackle fraud and money laundering. The country currently has almost 4,000 crypto ATMs, which is the highest number per capita globally, and they are seriously moving forward with this effort. They view the ATMs as elements in many frauds. This isn't shutting down crypto - digital currencies would still be available through brick-and-mortar money service businesses and other outlets, just not at ATMs. And I know you had something else from Canada.

John Byrne: FinTrac announced this week that they imposed monetary penalties on three businesses in the real estate, banking, and dealer-in-precious-metals-and-stones sectors. If you go to the FinTrac website, they list the details. One is Berks Group Incorporated, a dealer in precious metals - they committed three violations, it's been appealed, but there's a $51,000 fine. Twin City Realty, a real estate brokerage located in Ontario with branches elsewhere, received a penalty of $24,000 for committing one violation. The administrative penalty has been paid in full and the case is closed. The third is Versabank, a bank headquartered in London, Ontario, with an administrative monetary penalty of $42,000 - paid in full, case closed. Just as we do in the States, whenever you have penalties it's always important from a training perspective to look at what exactly the entity was accused of, and if the case is closed, what can we learn from that. You can find all of that on the FinTrac website.

Elliot Berman: Interesting that those were across three different sectors - each of which you and I have talked about over the years in terms of their risks and how they're dealt with in the U.S., the UK, and the EU.

John Byrne: You have some other things overseas - I think you have something out of the UK and Denmark.

Elliot Berman: I did. The FCA in the UK published an interesting update - they're in the process of moving, and we've talked about this, to a new crypto asset regime regulating firms in that space, which becomes fully effective in October 2027 when the new regulations - the Financial Services and Markets 2000 Crypto Assets Regulations 2026, a mouthful known generally as the FSMA - go into full effect. This is a reminder to all those organizations: if they're not already registered, here's how to get registered; if they are registered, here are any additional steps required. They really should be developing a realistic implementation plan adopted at the board level that addresses who will be accountable, what will need to change from their current program, how changes will be delivered, and when they will be completed. If you're touched by any of this in the UK, you should certainly take a look. And I think it's always good, regardless of where you are, to look at what the major regulators around the globe are doing - it's always a hint about how you might want to approach things. The next thing I saw was that the FIU in Denmark - the Financial Supervisory Authority, or FSA - indicated that it asked Danish police to investigate whether Nordea Bank has failed to comply with Danish money laundering regulations on customer due diligence. In the statement the FSA released, it said that Nordea did not have sufficient knowledge of individuals within a larger group of customers who were issued credit cards. So a lot of know-your-customer issues there. It also indicated that there was a systemic deficiency - not words you want to hear about your institution - and noted that Nordea did not have sufficient information to assess the purpose and intended use of the various business relationships. So again, know your customer. Something to watch, and something to think about in terms of your own organization. And then lastly, Europol has launched an EU anti-scam platform. The focus is to share intelligence on scam activity that Europol collects and ensure it moves out to financial services companies across the EU to give them additional tools to interdict scams. The platform's pillars are maximizing intelligence sharing, swift reactions to intercept and recover stolen funds, operational coordination, threat monitoring, public-private partnerships, and prevention - all things that you and I talk about regularly, and that are being thought about, talked about, and acted on globally.

John Byrne: A couple of other items to mention. There's an organization called the Anti-Corruption Data Collective, and they've done a recent analysis of prediction markets, which we've talked about. According to one of the researchers - and you can look this up on their website - they found that 52% of long-shot bets in military and defense markets on Polymarket win. Their research shows that across all markets, only 14% of long shots are correct, which according to the researcher is in line with expectations. So imagine only one or two of your underdogs win, but someone is getting them all right just before the game - they use the analogy of the World Cup or March Madness. What's concerning, they go on to say, is that the data is public and transparent - there are no secrets. If people are using confidential information for personal financial gain, they're doing it in the open because there's no limitation on this yet. They also call out the Commodity Futures Trading Commission, because it has the authority to say that betting on war isn't in the public interest and end these prediction markets in that particular area. This is something to watch. I know the Senate in the United States just passed a rule - I forget exactly how the process goes - prohibiting members of the Senate and their staffs from betting in these prediction markets, which is helpful, but the suggestion from the data collective is that much more needs to be done. They're a nonprofit based in Washington, DC, so if you get a chance, take a look at that. Also, our good friend Guy Fico, who just retired from IRS-CI, is now with Pastelanis. He received an award in the past week or so from the AML Intelligence folks at the conference he attended - well deserved recognition. We, meaning the AML Partnership Forum, were also able to recognize Guy's career work. Happy to see him recognized by AML Intelligence as well, and we're certainly going to make an effort to get some conversations with him when he has time to talk about his post-career. And I also wanted to mention - for those of you who have been involved in white-collar crime for years and certainly understand the value of the racketeering statutes created in the United States in the '70s - the author of those statutes has just passed away: Bob Blakey. Bob Blakey was a professor at Notre Dame hired by Congress to put together the RICO statutes, to be used to deal not just with organized crime but with any sort of organized criminal activity. He passed away at 90 - a good, long life. Those of us who have been in this space for a long time will remember the name Bob Blakey. The work he did has fundamentally changed criminal law jurisprudence, and it's still a statute that can be used to go after all sorts of white-collar criminals.

Elliot Berman: And you also pointed out something to me from the Manhattan DA's office.

John Byrne: Right. As we've been doing for a number of years in our conversations and separate podcasts - highlighting the concern with the theft and illicit use of antiquities - the lead office in the world on this is really the Manhattan DA's office. Alvin Bragg just announced that they have returned over 650 antiquities to India. The press release goes into detail about the work they did; DHS was involved, along with other agencies. That office in Manhattan has really been a leader in this area. To learn more, besides going to their website, you should also visit the Antiquities Coalition website, which has a lot of great information about this and related topics.

Elliot Berman: So John, do you want to talk about this month's webinar?

John Byrne: Let me cover a couple more things first. One is relevant to the compliance and regulatory world: the Justice Department has finally decided to drop its investigation and potential prosecution against Chairman Jerome Powell. My view is that it was a totally manufactured case because the administration wanted him to reduce rates. Bottom line - because a member of the Senate said he would not support the administration's replacement of Powell as chair until the case was dropped, it was in fact dropped. The Justice Department this week moved to vacate the ruling that had blocked subpoenas to the Federal Reserve. It'll be interesting to see how this continues. I know you have some thoughts on that as well.

Elliot Berman: I'll be curious to see how this works. Chairman Powell has made a couple of public statements indicating he was going to stay at the Fed. His term as a governor continues beyond his term as chair, and he has indicated he will likely stay on the Federal Reserve Board in part because he wants to be sure this investigation is truly done. I haven't been able to parse out yet how it's all going to work. The judge - presumably this is a motion before the court - can deny it, and I don't know what the Justice Department's reaction would be. They've indicated they're not planning to appeal. It's a little confounding to me, but that might be because my federal court skills are pretty rusty.

John Byrne: As everybody knows, we record these midweek, so by Friday things can always change. I did want to add that Kevin Warsh, the nominee to become chairman of the Fed, was asked during his testimony whether he could say that President Biden won the 2020 election, and he refused. The reason I mention that is there was also a series of judicial nominees seeking lifetime appointments who had a Senate hearing last week. After questioning by Senator Coons of Delaware, all of them said the same thing - that it had been certified - but they would not say that President Biden won the election. I really have a hard time understanding how we got here, but it is very concerning. The Democrats have no ability to stop these nominees. These are judges up for lifetime appointments who couldn't say that. I think it's more than concerning. And then - you asked me what's going on this month - on May 28th we're doing a webinar that I'm really excited about, focused on financial access challenges domestically and globally. We have three panelists who will give perspectives from Capitol Hill, from groups that have difficulty obtaining financial access, and from organizations that have done a lot of research in this space. We will of course take questions. I'm really looking forward to it, because this continues to be a major challenge for the industry as our colleagues try to figure out how to navigate these issues - and of course for humanitarian groups that need financial access for medical supplies, food, water, and all sorts of things we've talked about constantly. I'm looking forward to setting the stage and offering some potential additional recommendations on how to navigate this going forward.

Elliot Berman: You can register for the webinar at our website, and as John mentioned it will live stream at 1 p.m. Eastern Time on May 28th. John, your conversation about April with Sarah Beth Felix will have posted to our website by the time this episode is available, so people should listen to that - always good insight. Anything else you want to talk about?

John Byrne: I sat down with Dan Stipano and Rick Small under the Davis Polk umbrella and we did a webinar further discussing the AML program rule. If you go to the Davis Polk website or find me, Rick, or Dan on LinkedIn, you can sign up - the webinar is already done, so you just register and get the recording. And I'm also working on a conversation at the end of May with a recognized expert on anti-corruption who I've worked with over many years and who teaches at a number of schools, law schools, and universities. I'm trying to work out those dates for an end-of-month conversation - something that will post sometime in June. My goal as always with these conversations is to get a sense of where we are, what the recommendations are, and offer some operational and practical advice to navigate all of this.

Elliot Berman: John, have a great rest of the week. I know you're coming to Milwaukee for a quick trip and you and I are going to connect, but if not, I will talk to you next week.

John Byrne: Take care, stay safe.

Elliot Berman: Bye bye.